MyFinCards

Simple Interest Calculator

Simple interest is charged on the original principal for the whole term, so every year earns exactly the same amount. That makes it the cheaper option when you are lending and the more expensive one when a lender quotes it as a “flat rate”. This page shows the compound figure on the same inputs beside its own. See the compound interest calculator.

SimpleCompound
₹1,00,000
₹1,000₹1,00,00,000
6%
1%50%
5 Yr
1 Yr30 Yr
Principal amount₹1,00,000
Simple interest₹30,000
Total amount₹1,30,000

What the Total is Made Of

Total After 5 Years

₹1,30,000

On the same ₹1,00,000 at 6% for 5 years, simple interest pays ₹30,000 and compound interest pays ₹33,823 — a difference of ₹3,823. Simple interest keeps charging on the original ₹1,00,000 forever; compound interest charges on the balance, which is why the gap widens with every year rather than staying proportional. See the compound interest calculator.

Worked Example: ₹1,00,000 at 6% for 5 Years

Simple interest is P × R × T ÷ 100 = ₹1,00,000 × 6 × 5 ÷ 100 = ₹30,000. Every year earns exactly ₹6,000, because the base never changes.

Principal

₹1,00,000

what you start with

Simple interest

₹30,000

₹6,000 a year, flat

The other method

₹33,823

compound interest, same inputs

Which one applies to you is not a choice you make

It is set by the product. Indian bank FDs and RDs compound quarterly; most personal and car loans are quoted on a reducing balance, which is compounding; credit card revolving interest compounds monthly. A "flat rate" loan is the one that genuinely uses simple interest on the original amount — and it is almost always the more expensive of two offers quoting the same percentage.

What this Calculator Does

It applies P × R × T ÷ 100 and shows the arithmetic, not just the answer. Because the interesting question is almost always how simple interest compares with compound interest on the same money, the compound figure is computed alongside and the gap is stated in rupees.

How to Use It

1

Set the principal.

2

Set the annual rate and the term in years.

3

Read the interest and the total amount.

4

Check the compound figure in the note below — identical over one period, and never after.

Where Simple Interest Actually Applies

Fewer places than people assume. Indian bank FDs and RDs compound quarterly; most personal and car loans are quoted on a reducing balance, which is compounding; credit card revolving interest compounds monthly. The genuine simple-interest case is a “flat rate” loan — and it is almost always the more expensive of two offers quoting the same percentage.

Expert FAQ

Frequently Asked Questions

Interest = P × R × T ÷ 100, where P is the principal, R is the annual rate in percent and T is the time in years. The total you repay or receive is P plus that interest.
Simple interest is always charged on the original principal; compound interest is charged on the principal plus everything accumulated so far. They are identical over one compounding period and diverge from the second onward, and the gap widens the longer the term runs.
Essentially yes, and that is the problem with it. A flat-rate loan charges interest on the full original amount for the whole tenure even though you have been repaying principal throughout. A 10% flat rate is roughly equivalent to an 18% reducing-balance rate, so the two are not comparable at face value.
Flat-rate personal and vehicle loans from some lenders, certain short-term business advances, interest on delayed payments and compensation awards, and fixed deposits of under six months, where no compounding quarter completes. Most other retail products compound.
For the borrower, yes — at the same quoted rate, simple interest always costs less. For the saver it is the reverse. The catch is that lenders quoting a flat rate usually quote a lower number, which is precisely why it looks attractive.
There is no exact single formula because it depends on the repayment schedule, but a flat rate roughly doubles when restated as a reducing-balance rate over a typical tenure. The reliable method is to compute the actual EMI from the flat-rate total and then solve for the reducing rate that produces it.
No. Credit card revolving interest compounds monthly, and the rate is quoted per month rather than per year — a 3.5% monthly rate is 42% a year. That is the single most expensive form of consumer credit in India.
Yes — express the time as a fraction of a year. Six months is 0.5, ninety days is 90/365. This calculator takes whole years; for a shorter period, divide the annual interest proportionally.
Almost certainly because the loan is on a reducing balance rather than a flat rate. Each EMI pays interest on the outstanding amount, which falls every month, so the total interest is well below P × R × T even though the rate looks higher.
Neither in isolation. Compare the total amount repaid, or the EMI, over the same tenure. A flat rate and a reducing rate are different units, and comparing the percentages directly is the mistake the quoting convention is designed to encourage.